Google deal to buy travel search software firm is approved by Justice Department
By Jia Lynn Yang,
The Justice Department approved a controversial deal by Google on Friday that will allow the firm to acquire a powerful travel search software firm, while adding conditions that acknowledged rivals’ concerns over the tech giant’s increasing dominance on the Web.
In exchange for greenlighting Google’s $700 million purchase of ITA Software, which owns the technology that powers most online flight searches, U.S. antitrust officials will for the first time formally monitor the search giant’s behavior.
But in a relief to Google, officials mostly left untouched the broader issue of how the world’s most popular search engine ranks its products vs. those of its competitors. This concern was raised during the government’s review of the deal because Google wants to develop its own flight search engine, and some airfare sites are worried their products could end up lower in Google’s results.
For months, Google and antitrust officials tussled over what kinds of conditions the tech company would accept to avoid a showdown in court.
“The acquisition, as originally proposed, would have substantially lessened competition among providers of comparative flight search websites in the United States, resulting in reduced choice and less innovation for consumers,” the Justice Department said in a statement.
To resolve these concerns, government officials want Google to continue licensing ITA’s software to airfare Web sites that use the company’s technology, a group that includes Orbitz, Microsoft’s Bing and Kayak. Google will also have to add fire walls to prevent the company from accessing inside information from ITA’s customers that Google could use to outdo its competitors as it launches its own travel search engine.
In addition, Google must promise to continue developing ITA’s technology at a level similar to what the software firm has pursued in the past.
“The Department of Justice’s proposed remedy promotes robust competition for airfare websites by ensuring those websites will continue to have access to ITA’s pricing and shopping software,” Joseph Wayland, deputy assistant attorney general of the Justice Department’s antitrust division, said in a statement. “The proposed settlement assures that airfare comparison and booking websites will be able to compete effectively, providing benefits to consumers.”
Google cheered the decision, which paves the way for the company to launch its own flight search engine with the added benefit of owning ITA’s technology.
“We’re excited that the U.S. Department of Justice today approved our acquisition,” Jeff Huber, a senior vice president at Google, wrote in an official company blog post. “It’s important to us that ITA continue with business as usual, providing great service to its business partners.”
Airfare sites that criticized the deal were relieved Friday that Google cannot cut them off from using ITA’s technology, which is critical for them to operate. They also praised the formal complaint process included in the deal that will allow Google’s rivals to lodge concerns to the Justice Department, a sign that antitrust officials will continue watching the company closely.
“We think this is a very positive step,” said Tom Barnett, counsel to Expedia and former assistant attorney general in charge of the Justice Department’s antitrust division. “To their credit, [Justice officials] rolled up their sleeves and they looked at the facts and they educated themselves.”
But Gary Reback, an antitrust attorney in Silicon Valley and a frequent critic of Google, said the deal falls short because it doesn’t address the central issue of whether Google unfairly shuts out competitors. And Reback said the complaint process described in the agreement is not different from the way that firms can already approach the government with their concerns.
“We’ve been told to sit around and wait until the ITA investigation has concluded, and we’ve been waiting and nothing’s happened,” said Reback, who has called for the government to launch a broader investigation of the company.
The ITA decision comes as Google approaches a pivotal point in its relations with Washington. Last week, the Federal Trade Commission said it was imposing regular audits on the company for violating privacy agreements with users when it released its Buzz social-networking product.
There also has been growing interest at the Justice Department and the FTC to examine the company’s power in the search market, though neither agency has begun an official inquiry. The monitoring of the ITA acquisition could give the government a better window into how Google operates.
Meanwhile, European Union antitrust officials have gone ahead with an investigation into Google’s dominance after complaints from other tech firms, including Microsoft. Google has repeatedly said that users are free to use other search engines but that they stick with Google because the company’s products are better.
A federal district court judge still has to finalize the agreement between the Justice Department and Google. But the issue of whether Google can rank its own products higher in its search results “will be decided another day,” tech analyst Rebecca Arbogast, managing director at Stifel Nicolaus, wrote in a note.